Chicago 2016's About-Face Increases Financial Risk For Taxpayers

Chicago Mayor Richard Daley's decision to sign the IOC host city bid contract without modifications "jeopardizes his long-standing pledge to limit potential taxpayer exposure," according to Hersh, Bergen & Heinzmann of the CHICAGO TRIBUNE. Chicago 2016 officials said that they can "offer the guarantee because they plan to add another insurance policy worth a minimum" of $500M to the existing guarantees, "which they think creates an ample buffer for taxpayers." However, signing the host city contract as is "could leave taxpayers on the hook for hundreds of millions of dollars or even more." Chicago 2016 Chair Pat Ryan acknowledged that after "months of saying that signing the contract was not an option, Chicago's Olympic leaders saw no other avenue." Ryan: "The IOC said they expected the standard host-city contract to be signed. We could amend it but that put us at the risk of individual (IOC) members' interpretation of why. We decided to go out and get more insurance so the risk (of liability for the city) was extremely remote." Daley is "counting on the private sector to shoulder the lion's share of the cost though already there is some public-sector participation planned," and yesterday's decision "ups the ante considerably." Daley Press Secretary Jacquelyn Heard contends that signing the contract "would not put taxpayers further on the hook." Heard: "When the mayor said he was prepared to sign the host-city contract as is, he said it with the knowledge that by the time we are required to sign it, we will have solidified this private extra insurance. The mayor would not even think about going back to the taxpayers to finance the Olympics." However, Ryan admitted that if "losses exceeded the guarantees, the city would indeed be responsible for covering the costs" (CHICAGO TRIBUNE, 6/18).

SIGN, SEALED, DELIVERED? Heard said that with the new "layer of insurance protection," Daley intends to sign the host city contract "without returning to the City Council for authorization." Several Chicago Aldermen "strongly disagreed," arguing that Daley has "'no authority' to sign the host-city contract without Council approval" (CHICAGO SUN-TIMES, 6/18). The CHICAGO TRIBUNE's Bergen & Hersh note it is unclear "just how the city would reconcile the difference between the size of its limited guarantees and the potential price tag for putting on the Games." Chicago 2016 President Lori Healey said that the additional insurance policy "brings the bid's aggregate safety net to a point where the likelihood of any further liability [is] extremely remote," and it "should provide the necessary assurance" the IOC has asked for (CHICAGO TRIBUNE, 6/18). CRAIN'S CHICAGO BUSINESS' Greg Hinz noted Chicago 2016 officials and Daley "continue to insist that the risk to taxpayers is theoretical," but for an event with a projected $3.3B operations budget, that is a "lot of theoreticals." Olympic Games "traditionally make money on operation." But there is "no guarantee it's true," and the "only guarantee will come from taxpayers." Before Chicago 2016 signs the contract, the City Council "needs to fully explore every aspect of just who's liable for what." Hinz: "I've been a backer of the Chicago 2016 Olympics bid. But it's getting hard to remain one. It's time for Mr. Daley to disclose everything, answer all the questions, and for the City Council to do its job" (CHICAGOBUSINESS.com, 6/17). A CHICAGO TRIBUNE editorial states Daley's decision to sign the host city contract "removes a big IOC question about Chicago's bid -- but at what potential cost to Chicago taxpayers?" Did Daley "just commit his citizens to write a blank check?" Before Chicago 2016 signs the contract ahead of the IOC meetings in October, Daley has "plenty of time to come home and explain to taxpayers ... just how they're still protected" (CHICAGO TRIBUNE, 6/18).

FOUR SCORE: The TRIBUNE's Philip Hersh notes there was a "widespread feeling among IOC members that all four cities" -- Chicago, Rio de Janeiro, Madrid and Tokyo -- yesterday "acquitted themselves well" during bid presentations to IOC members. IOC member Peter Tallberg said that all four cities "demonstrated their ability to finance the Games, even if Chicago cannot offer the same kinds of government guarantees as the others." Tallberg: "If the United States cannot (raise) the money, nobody can." IOC President Jacques Rogge said, "I am a lucky man not being obliged to vote, because it is going to be a very difficult choice." However, Hersh reports after yesterday's presentations, Rio "might look like the favorite." The Games have never been held in South America, and IOC member Kevan Gosper said, "They made an argument no one can beat. They took away the issue that you can't have the World Cup (which Brazil has in 2014) and Olympics within two years by showing (three) other countries had done it. The timing is working in their favor. At the moment, they are looking good as a country, coming in at a time when their economy is looking very strong" (CHICAGO TRIBUNE, 6/18). Rogge said, "I can say very clearly that the four bid cities are capable of hosting superb games" (MIAMI HERALD, 6/18).